Sales Tax Holidays

July 2010

A “sales tax holiday” is a period of time, usually lasting a few days, during which state sales tax and sometimes local sales taxes are not levied on a set of goods. This report begins with a history of sales tax holidays and a discussion of the major issues surrounding them. The report then focuses on an analysis of sales scanner data from nine tax holidays on computer purchases (all held in August 2007) to determine 1) how the prices consumers paid changed during the holidays, 2) the extent to which consumers shifted their purchases across time to coincide with the reduced tax rate, 3) the extent to which the holidays generated new computer purchases that would not have been made in the absence of the holidays, and 4) the effect of the policy on the sales tax revenue for participating states.